After several failed and postponed votes, the European Council agreed on a revised Corporate Sustainability Due Diligence Directive (CSDDD) on March 15, paving the way for it to be passed into law in a European Parliament vote scheduled for April. It requires EU-based companies with global turnover of at least €450m and 1000 employees to identify, mitigate and prevent negative impacts on human rights and the environment in their upstream and downstream supply chains, or risk being fined up to 5% of net turnover.
The situation in Germany, which got ahead of the EU by introducing a national Supply Chain Due Diligence Act a year ago, shows there are no shortcuts to compliance. German authorities have clamped down on firms trying to transfer their legal responsibilities onto suppliers by requiring them to sign an ESG code of conduct. "It's not sufficient just to ask your supplier to fulfil everything," said White & Case partner Julia Sitter. "You have to control and report on it."
Another top concern among the private sector and politicians is the emerging patchwork of laws regulating ESG in global supply chains. "Various countries are looking at measures that may be focused on reporting, due diligence or trade prohibitions," said White & Case partner Clare Connellan. "They're all trying to get the same [point], but from different angles. That can make it quite difficult for companies to work out what to do when looking at their own supply chains."
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